Follow Fast Company

This morning Daimler announced plans to take a 10% share in Tesla, Elon Musk's electric vehicle start-up. So why did the German auto giant snap up such a large piece of a struggling young company? Simply put, Daimler wants the benefit of a small company's ability to dream big, and in return Tesla wants the comfort of monetary security.

As part of the partnership—estimated to be in the double-digit millions—Daimler will use Tesla's battery packs in the first 1,000 units of its electric Smart Cars, scheduled for a 2012 release. Tesla doesn't manufacture batteries in-house, so the company may make battery packs with Tesla control and cooling systems along with Li-Tec cells. Daimler will also sit on Tesla's board of directors as part of the agreement and provide the company with the industry expertise that only an automaker with decades of experience can provide. According to Musk, Daimler's expertise will speed up the production of the Tesla Model S.

Daimler is releasing its first battery-powered Mercedes Benz in 2010, but the company hasn't said that Tesla will provide batteries. Production on Daimler's electric drive Smart Fortwo car will begin later this year at the Smart assembly plant in Hambach, France.